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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1996
-----------------------------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission file number: 1-7945
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DELUXE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0216800
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3680 VICTORIA ST. N., ST. PAUL, MINNESOTA 55126-2966
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(612) 483-7111
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at August 1, 1996 was 82,433,612.
1
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<TABLE>
<CAPTION>
ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, 1996 December 31,
(Unaudited) 1995
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $21,058 $13,668
Trade accounts receivable 178,922 169,310
Inventories:
Raw material 23,267 22,475
Semi-finished goods 16,349 24,861
Finished goods 24,532 28,566
Supplies 10,591 11,139
Deferred advertising 12,511 20,017
Deferred income taxes 36,757 35,926
Prepaid expenses and other current assets 45,687 55,136
------ ------
Total current assets 369,674 381,098
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LONG-TERM INVESTMENTS 51,759 48,147
PROPERTY, PLANT AND EQUIPMENT
Land 43,524 43,632
Buildings and improvements 313,153 299,954
Machinery and equipment 584,142 578,922
Construction in progress 514 18,315
--- ------
Total 941,333 940,823
Less accumulated depreciation 473,061 446,665
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Property, plant, and equipment - net 468,272 494,158
INTANGIBLES
Cost in excess of net assets acquired - net 302,771 301,289
Other intangible assets - net 87,279 70,403
------ ------
Total intangibles 390,050 371,692
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TOTAL ASSETS $1,279,755 $1,295,095
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $62,230 $75,644
Accrued liabilities:
Wages, including vacation pay 59,915 51,549
Employee profit sharing and pension 29,241 56,906
Accrued rebates 36,197 31,373
Restructuring costs 27,614 6,283
Other 103,678 89,392
Short-term debt 28,433 48,962
Long-term debt due within one year 9,559 8,699
----- -----
Total current liabilities 356,867 368,808
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LONG-TERM DEBT 111,355 110,997
DEFERRED INCOME TAXES 35,937 34,916
SHAREHOLDERS' EQUITY
Common shares - $1 par value (authorized 500,000,000 shares; issued: 82,359,242) 82,359 82,364
Additional paid-in capital 668 1,455
Retained earnings 692,953 697,036
Cumulative translation adjustment 474 500
Unearned compensation (632) (739)
Net unrealized change - marketable securities (226) (242)
---- ----
Total shareholders' equity 775,596 780,374
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,279,755 $1,295,095
---------- ----------
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</TABLE>
See Notes to Consolidated Financial Statements
2
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<TABLE>
<CAPTION>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except per Share Amounts)
(Unaudited)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $466,580 $442,266 $954,668 $907,655
OPERATING EXPENSES
Cost of sales 211,543 200,729 462,206 410,512
Selling, general, and administrative 168,633 163,801 353,802 342,812
Employee profit sharing and pension 16,239 15,142 30,648 29,763
Employee bonus and stock purchase discount 4,192 7,155 8,093 12,639
----- ----- ----- ------
Total 400,607 386,827 854,749 795,726
------- ------- ------- -------
INCOME FROM OPERATIONS 65,973 55,439 99,919 111,929
OTHER INCOME (EXPENSE)
Other income 1,794 1,381 2,907 7,444
Interest expense (2,518) (3,273) (5,305) (6,276)
------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 65,249 53,547 97,521 113,097
PROVISION FOR INCOME TAXES 27,193 22,805 40,544 47,803
------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS 38,056 30,742 56,977 65,294
DISCONTINUED OPERATIONS
Loss from operations (net of income tax benefit of $699 and $1,193 for the
quarter and six months ended June 30, 1995, respectively) (1,010) (1,723)
------ ------ ------ ------
NET INCOME $38,056 $29,732 $56,977 $63,571
------- ------- ------- -------
------- ------- ------- -------
AVERAGE COMMON SHARES OUTSTANDING 82,378,062 82,370,935 82,397,264 82,406,161
NET INCOME PER COMMON SHARE FROM CONTINUING OPERATIONS $0.46 $0.37 $0.69 $0.79
NET INCOME PER COMMON SHARE FROM DISCONTINUED OPERATIONS $(0.01) $(0.02)
------ ------ ------ ------
NET INCOME PER SHARE $0.46 $0.36 $0.69 $0.77
CASH DIVIDENDS PER COMMON SHARE $0.37 $0.37 $0.74 $0.74
See Notes to Consolidated Financial Statements
3
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DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Dollars in Thousands)
(Unaudited)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $56,977 $63,571
Discontinued operations 1,723
----- -----
Income from continuing operations 56,977 65,294
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 33,740 32,215
Amortization of intangibles 19,129 16,660
Stock purchase discount 3,840 4,094
Changes in assets and liabilities, net of effects from acquisitions and discontinued operations:
Trade accounts receivable (7,118) (5,453)
Inventories 10,850 (8,093)
Accounts payable (14,259) (9,838)
Restructuring costs 21,331
Other assets and liabilities 11,328 (18,745)
------ ------
Net cash provided by continuing operations 135,818 76,134
Net cash used by discontinued operations (1,051) (330)
------ ------
Net cash provided by operating activities 134,767 75,804
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable securities with maturities of more than 3 months 6,250 13,409
Purchases of property, plant, and equipment (41,228) (62,495)
Payments for acquisitions, net of cash acquired (8,723) (37,282)
Other 7,781 364
----- -----
Net cash used in investing activities (35,920) (86,004)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (4,156) (5,591)
Payments to retire common stock (18,338) (15,768)
Proceeds from issuing stock under employee plans 13,102 12,320
Net (payments for) proceeds from short-term debt (21,005) 73,614
Cash dividends paid to shareholders (61,060) (61,093)
------- -------
Net cash (used in) provided by financing activities (91,457) 3,482
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,390 (6,718)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,668 29,139
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $21,058 $22,421
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of June 30, 1996, and the related
consolidated statements of income for the three-month and six-month periods
ended June 30, 1996 and 1995 and the consolidated statements of cash flows
for the six-month periods ended June 30, 1996 and 1995 are unaudited; in
the opinion of management, all adjustments necessary for a fair
presentation of such financial statements are included. Other than those
discussed in the notes below, such adjustments consist only of normal
recurring items. Interim results are not necessarily indicative of results
for a full year.
The financial statements and notes are presented in accordance with
instructions for Form 10-Q, and do not contain certain information included
in the Company's annual financial statements and notes.
2. The Company has uncommitted bank lines of credit of $189.3 million
available at variable interest rates. As of June 30, 1996, $18.4 million
was drawn on those lines at a weighted average interest rate of 6.1%.
Also, the Company has in place a $150 million committed line of credit
which is available for borrowing and as support for commercial paper. As
of June 30, 1996, $10 million of commercial paper was issued and
outstanding at a weighted average interest rate of 5.5%. The Company also
has in place a medium-term note program for the issuance of up to $300
million of medium-term notes to be used for general corporate purposes,
including working capital, repayment or repurchase of outstanding
indebtedness and other securities of the Company, capital expenditures, and
possible acquisitions. As of June 30, 1996, no such notes were issued or
outstanding.
3. During the fourth quarter of 1995, the Company adopted a plan to
discontinue its Printwise ink business. The Company recorded charges in
the fourth quarter of 1995 for the disposal of the business, and
anticipated operating losses until disposal. Accordingly, Printwise is
reported as a discontinued operation for the 1996 and 1995 periods
presented.
4. During the first quarter of 1996, the Company recorded charges of $34.8
million related to the closing of 21 of its check printing plants and the
movement of PaperDirect's operations from New Jersey to existing company
facilities in Colorado and Minnesota. The $34.8 million of charges include
employee severance costs and expected losses on the disposition of plant
and equipment. Expenses of $32 million are included in cost of goods sold
and $2.8 million in selling, general, and administrative expense. $27.5
million of the charges are expected to be in the form of cash outlays
occurring in 1996 and 1997, almost all of which will be applied to employee
severance costs. The Company expects to fund such outlays from cash
generated by operations.
5. In July of 1996, the Company sold its T/Maker subsidiary and certain
assets of its Internal Bank Forms unit. The effect of these sales will not
have a material impact on the operating results of the Company.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPANY PROFILE
Effective January 1, 1996, the Company reorganized its many independent business
units into two market-serving segments, Financial Services and Deluxe Direct.
Through Deluxe Financial Services, the Company provides check printing,
electronic funds transfer, and related services to financial institutions in the
United States, Canada, and the United Kingdom; payment systems protection
services including check authorization, account verification, and collection
services to financial institutions and retailers; and electronic benefit
transfer services to state governments. Through Deluxe Direct, the Company
provides direct mail checks and specialty papers to households and small
businesses; tax forms and electronic tax filing services to tax preparers; and
direct mail greeting cards, gift wrap, and related products to households.
During the first quarter of 1996, the Company recorded charges of $34.8 million
related to the closing of 21 of its check printing plants, and the movement of
PaperDirect's operations from New Jersey to existing company facilities in
Colorado and Minnesota. Although no assurances can be given in such regard, the
Company anticipates that the consolidation of its check printing plants and its
other restructuring and cost reduction efforts may result in annual pre-tax cost
reductions of approximately $150 million by the end of 1997. Such anticipated
reductions will be reflected primarily in the form of reduced facility,
materials and employee expenses in the Company's operating results.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1995
Net sales were $954.7 million for the six months ended June 30, 1996, up 5.2%
over the six months ended June 30, 1995, when sales were $907.7 million. The
Deluxe Financial Services segment's revenue for the first six months of 1996
increased 9.1% over the first six months of 1995, due to revenue growth in all
units. Financial institution check printing revenues were up 3.3%, despite a
slight decline in order counts. The improved results are due to an improved
product mix, a first quarter 1996 price increase, and benefits from the
integration of the businesses that serve financial institutions. The Deluxe
Direct segment's revenue for the first six months of 1996 decreased 2.4% from
the first six months of 1995, due primarily to lower sales of social expression
products.
Selling, general, and administrative expenses increased $11.0 million or 3.2%
for the first six months of 1996 over the first six months of 1995. The Deluxe
Financial Services segment's selling, general and administrative expenses for
the first six months of 1996 increased 6.2% over the first six months of 1995,
due primarily to costs related to the closing of 21 check printing plants and
increased selling expense for financial institution check printing. The Deluxe
Direct segment's selling, general and administrative expenses for the first six
months of 1995 decreased 4.6% from the first six months of 1995, due primarily
to lower advertising expense and reductions in general and administrative
expense throughout the segment.
Net income from continuing operations was $57.0 million for the first six months
of 1996, or 6.0% of sales, compared to $65.3 million for the first six months of
1995, or 7.2% of sales. The decrease from 1995 is due to $34.8 million of
pretax charges taken in the first quarter of 1996 for the closing of 21 check
printing plants and the movement of PaperDirect's operations from New Jersey to
existing company facilities in Colorado and Minnesota. Included in the 1995
income is approximately $5 million of pretax gain resulting from insurance
payments for 1994 earthquake damages to Company facilities.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1995
Net sales were $466.6 million for the second quarter of 1996, up 5.5% over the
second quarter of 1995, when sales were $442.3 million. The Deluxe Financial
Services segment's revenue increased 9.3% over the second quarter of 1995, due
to revenue growth in all units. Financial institution check printing revenues
were up 3.8% over 1995. The improved results are due to an improved product
mix, higher prices, and benefits from the integration of the businesses that
serve financial institutions. The Deluxe Direct segment's revenue decreased
2.5% from 1995, due primarily to lower sales of social expressions products.
Selling, general and administrative expenses increased $4.8 million or 2.9% in
second quarter 1996 over second quarter 1995. The Deluxe Financial Services
segment's second quarter 1996 selling, general and administrative expenses
increased 4.6% over second quarter 1995, due primarily to increased selling
expenses for financial institution check printing. The Deluxe Direct segment's
selling, general and administrative expenses decreased 4.9% from second quarter
1995, due primarily to lower advertising expense and reductions in general and
administrative expense throughout the segment.
Net income from continuing operations was $38.1 million for the second quarter
of 1996, or 8.2% of sales, compared to $30.7 million for the second quarter of
1995, or 7.0% of sales. The increase over 1995 is attributable to improvements
in both the Deluxe Financial Services and Deluxe Direct segments.
6
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FINANCIAL CONDITION - LIQUIDITY
Cash provided by continuing operations was $135.8 million for the first six
months of 1996, compared with $76.1 million for the first six months of 1995.
This represents the Company's primary source of working capital for financing
capital expenditures and paying cash dividends. The Company's working capital
on June 30, 1996 was $12.8 million compared to $12.3 million on December 31,
1995.
FINANCIAL CONDITION - CAPITAL RESOURCES
Purchases of property, plant, and equipment totaled $41.2 million for the first
six months of 1996 compared to $62.5 million one year ago.
The Company has uncommitted bank lines of credit of $189.3 million. As of June
30, 1996, $18.4 million was drawn on those lines. In addition, the Company has
in place a $150 million committed line of credit which is available for
borrowing and as support for commercial paper. As of June 30, 1996, $10
million of commercial paper was issued and outstanding. The company also has in
place a medium-term note program for the issuance of up to $300 million of
medium-term notes. As of June 30, 1996, no such notes were issued or
outstanding.
Cash dividends totaled $61.1 million for the first six months of 1996 compared
to $61.1 million for the first six months of 1995.
7
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PART II. OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual shareholders' meeting on May 6, 1996:
71,457,713 shares were represented (86.66% of the 82,454,607 shares
outstanding).
1. Election of Directors:
The nominees listed in the proxy statement were: John A. Blanchard
III, Harold V. Haverty, Whitney MacMillan, Jerry K. Twogood, Dr. James
J. Renier, Barbara B. Grogan, Allen F. Jacobson, and Stephen P.
Nachtsheim.
The results were as follows:
for all nominees: 70,133,720
Withheld as to all
nominees: 693,200
Withheld as to fewer
than all nominees: 630,793
2. Approval of the 1996 Annual Incentive Plan:
For: 65,122,770
Against: 5,623,054
Abstain: 711,889
Broker Non-Vote: 0
3. Approval of certain amendments to the Stock Incentive Plan:
For: 46,428,909
Against: 18,662,699
Abstain: 779,914
Broker Non-Vote: 5,586,191
4. Approval of certain amendments to the Performance Share Plan:
For: 60,720,748
Against: 4,360,052
Abstain: 790,722
Broker Non-Vote: 5,586,191
5. Ratification of appointment of Deloitte & Touche LLP as independent
auditors:
For: 70,517,700
Against: 504,842
Abstain: 435,171
Broker Non-Vote: 0
8
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PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
When used in this Form 10-Q and in past and future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "should result," "are expected to," "will continue," "will
approximate," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
necessarily subject to certain risks and uncertainties, including those
discussed under the caption "Risk Factors and Cautionary Statements" below, that
could cause actual results to differ materially from the Company's historical
experience and its present expectations or projections. Caution should be taken
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. The factors listed below could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ from any opinions or statements expressed with respect
thereto. Such differences could be material and adverse.
The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances occurring after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
RISK FACTORS AND CAUTIONARY STATEMENTS
TIMING AND AMOUNT OF ANTICIPATED COST REDUCTIONS. With regard to the results of
the Company's ongoing cost reduction efforts, there can be no assurance that the
anticipated $150 million of annual pre-tax cost savings will be fully realized
or will be achieved within the time periods expected. The implementation of the
printing plant closures is, in large part, dependent upon the successful
development of the software needed to streamline the check ordering process and
redistribute the resultant order flow among the Company's remaining printing
plants. Because of the complexities inherent in and the lengthy testing periods
associated with the development of software products as sophisticated as those
needed to accomplish this task, there can be no assurance that unanticipated
development delays will not occur. Any such occurrence could adversely affect
the planned consolidation of the Company's printing facilities and delay the
realization or reduce the amount of the anticipated expense reductions.
In addition, the achievement of the expected level of cost savings is dependent
upon the successful execution of a variety of other cost reduction strategies.
These additional efforts include the consolidation of the Company's purchasing
process, the disposition of unprofitable or low-margin businesses and other
efforts. The optimum means of actualizing many of these strategies is, in some
cases, still being evaluated by the Company. Unexpected delays, complicating
factors and other hindrances are common in these types of endeavors and can
arise from a variety of sources, some of which are likely to have been
unanticipated. A failure to timely achieve one or more of the Company's
primary cost reduction objectives could materially reduce the benefit to the
Company of its cost savings programs and strategies or substantially delay the
full realization of their expected benefits.
Further, there can be no assurance that increased expenses attributable to other
areas of the Company's operations or to increases in raw material, labor,
equipment or other costs will not offset some or all of the savings expected to
be achieved through the cost reduction efforts. Competitive pressures and other
market factors may also require the Company to share the benefit of some or all
of any savings with its customers or otherwise adversely affect the prices it
receives or the market for its products. As a result, even if the expected cost
reductions are fully achieved in a timely manner, such reductions may not be
fully reflected by commensurate gains in the Company's net income, dividend rate
or the price of its Common Stock.
EFFECT OF FINANCIAL INSTITUTION CONSOLIDATION. There is an ongoing trend
towards increasing consolidation within the banking industry that has resulted
in increased competition and pressure on prices. This concentration greatly
increases the importance to the Company of retaining its major customers and
attracting significant additional customers in an increasingly competitive
environment. Although the Company devotes considerable efforts towards the
development of a competitively priced, high quality suite of products for the
financial services industry, there can be no assurance that significant
customers will not be lost nor that any such loss can be counterbalanced through
the addition of new customers or by expanded sales to the Company's remaining
customers.
RAW MATERIALS AND POSTAGE COSTS. Increases in the price of paper and the cost
of postage can adversely affect the profitability of the Company's printing and
mail order businesses. Competitive pressures and overall trends in the retail
marketplace may have the effect of inhibiting the Company's ability to reflect
increased costs of production in the retail prices of its products.
COMPETITION. Although the Company believes it is the leading check printer in
the United States, it faces considerable competition from other smaller
companies in both its traditional marketing channel to financial institutions
and from direct mail marketers of checks. From time to time, one or more of
these competitors reduce the price of their products in an attempt to gain
market share. The corresponding pricing pressure placed on the Company has
resulted in reduced profit margins in the past and there can be no assurance
that similar pressures will not be exerted in the future.
9
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TECHNOLOGICAL CHANGE. Check printing is, and is expected to continue to be, an
essential part of the Company's business and the principal source of its
operating income. A wide variety of alternative payment delivery systems,
including credit cards, debit cards, smart cards, ATM machines, direct deposit
and bill paying services, home banking applications and Internet-based retail
services, are in various stages of development and additional systems will
likely be introduced. Although Deluxe expects that there will continue to be a
substantial market for checks for the foreseeable future, the rate and the
extent to which these alternative systems will achieve consumer acceptance and
replace checks cannot be predicted.
An unexpected surge in the popularity of any of these alternative payment
methods could have a material, adverse effect on the market for Deluxe's primary
products and its payment protection and collection services. In addition, the
publicity generated by the promoters of these systems and the attendant media
coverage of their development and introduction may have a depressing effect on
the market price of the Company's Common Stock that is disproportionate to their
actual competitive impact.
ANALYST ESTIMATES. From time to time, authorized representatives of the Company
may comment on the perceived reasonableness of published reports by independent
analysts regarding the Company's projected future performance. Such comments
should not be interpreted as an endorsement or adoption of any given estimate or
range of estimates or the assumptions and methodologies upon which such
estimates are based. The Company does not make public its own internal
projections, budgets or estimates. Undue reliance should not be placed on any
comments regarding the conformity, or lack thereof, of any independent estimates
with the Company's own present expectations regarding its future results of
operations.
Any forecast regarding the Company's future performance reflects various
assumptions. These assumptions are subject to significant uncertainties and, as
a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors, many of which are
beyond the Company's control. In addition, the methodologies employed by the
Company in arriving at its own internal projections and the approaches taken by
independent analysts in making their estimates are likely different in many
significant respects. Although the Company may presently perceive a given
estimate to be reasonable, changes in the Company's business, market conditions
or the general economic climate may have varying effects on the results obtained
through the use of differing analyses and assumptions. The Company expressly
disclaims any continuing responsibility to advise analysts or the public markets
of its view regarding the current accuracy of the published estimates of outside
analysts. Persons relying on such estimates should pursue their own independent
investigation and analysis of their accuracy and the reasonableness of the
assumptions on which they are based.
10
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT NO. DESCRIPTION METHOD OF FILING
10.1 Deluxe Corporation 1996 Filed herewith
Annual Incentive Plan
10.2 Deluxe Corporation Stock Filed herewith
Incentive Plan (as amended)
10.3 Deluxe Corporation Performance Filed herewith
Share Plan (as amended)
12.2 Computation of Ratio of Filed herewith
Earnings to Fixed Charges
27.2 Financial Data Schedule Filed herewith
(b) The registrant did not, and was not required to, file any reports on
Form 8-K during the quarter for which this report is filed.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DELUXE CORPORATION
(Registrant)
Date August 14, 1996 /s/ J.A. Blanchard III
------------------------- ------------------------------
J.A. Blanchard III, President
and Chief Executive Officer
(Principal Executive Officer)
Date August 14, 1996 /s/ C.M. Osborne
------------------------- ------------------------------
C. M. Osborne, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
12
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE NO.
10.1 Deluxe Corporation 1996
Annual Incentive Plan
10.2 Deluxe Corporation Stock
Incentive Plan (as amended)
10.3 Deluxe Corporation Performance
Share Plan (as amended)
12.2 Computation of Ratio of
Earnings to Fixed Charges
27.2 Financial Data Schedule
13
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DELUXE CORPORATION
1996
ANNUAL INCENTIVE PLAN
1. ESTABLISHMENT. On February 9, 1996 the Board of Directors of Deluxe
Corporation, upon recommendation by the Compensation Committee of the Board of
Directors, approved an incentive plan for executives as described herein, which
plan shall be known as the "Deluxe Corporation 1996 Annual Incentive Plan."
This Plan shall be submitted for approval by the shareholders of Deluxe
Corporation at the 1996 Annual Meeting of Shareholders. This Plan shall be
effective as of January 1, 1996, subject to its approval by the shareholders,
and no benefits shall be issued pursuant thereto until after this Plan has been
approved by the shareholders.
2. PURPOSE. The purpose of this Plan is to advance the interests of Deluxe
Corporation and its shareholders by attracting and retaining key employees, and
by stimulating the efforts of such employees to contribute to the continued
success and growth of the business of the Company. This Plan is further
intended to provide employees with an opportunity to increase their ownership of
the Company's common stock and, thereby, to increase their personal interest in
the long-term success of the business in a manner designed to increase
shareholder value.
3. DEFINITIONS. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
3.1. BASE SALARY - a Participant's annualized base salary, as
determined by the Committee, as of the last day of a Performance Period.
3.2. COMPENSATION COMMITTEE - a committee of the Board of Directors of
the Company designated by such Board to administer the Plan which shall consist
of members appointed from time to time by the Board of Directors and shall be
composed of not fewer than such number of directors as shall be required to
permit the Plan to satisfy the requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934
(the "1934 Act"), as amended, or any successor rule or regulation ("Rule
16b-3"). Each member of the Compensation Committee shall be a "disinterested
person" within the meaning of Rule 16b-3 and an "outside director" within the
meaning of Section 162(m) of the Code.
3.3. CODE - the Internal Revenue Code of 1986, as it may be amended
from time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
3.4. COMMON STOCK - the common stock, par value $1.00 per share, of the
Company.
3.5. COMPANY - Deluxe Corporation, a Minnesota corporation, and any of
its subsidiaries or affiliates, whether now or hereafter established.
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3.6. DELUXE - Deluxe Corporation, a Minnesota corporation, and all
subsidiaries included in its consolidated financial reports for a given period.
3.7. EXECUTIVES - all Participants for a given Performance Period
designated by the Compensation Committee as "Executives" for purposes of this
Plan. The Compensation Committee shall designate as Executives all Participants
it reasonably believes may be "named executive officers" under Rule 402
promulgated under the 1934 Act for that Performance Period.
3.8. MAXIMUM AWARD PERCENTAGE - a percentage, which may be greater or
less than 100%, as determined by the Committee for each Participant with respect
to each Performance Period and with respect to each Performance Factor.
3.9. OTHER PARTICIPANTS - all Participants for a given Performance
Period who are not designated as "Executives" by the Compensation Committee for
such Performance Period.
3.10. PARTICIPANTS - any management or highly compensated employees of
the Company who are designated by the Compensation Committee prior to the start
of a Performance Period as Participants in this Plan. Directors of the Company
who are not also employees of the Company are not eligible to participate in the
Plan. Participants shall be designated as either Executives or Other
Participants by the Compensation Committee as provided in Section 4.3 below.
3.11. PERFORMANCE FACTOR - the preestablished, objective performance
goals selected by the Committee for each Participant with respect to each
Performance Period and which shall be determined solely on account of the
attainment of one or more preestablished, objective performance goals selected
by the Committee in connection with the grant of an award hereunder; provided,
however, that in the case of Other Participants, such performance goals need not
be objective and may be based on such business criteria as the Committee may
determine to be appropriate, which may include financial and nonfinancial
performance goals that are linked to such individual's business unit or the
Company as a whole or to such individual's areas of responsibility. The
objective performance goals for Executives shall be based solely on one or more
of the following business criteria, which may apply to the individual in
question, an identifiable business unit or the Company as a whole, and on an
annual or other periodic or cumulative basis: sales values, margins, volume,
cash flow, stock price, market share, sales, earnings per share, profits,
earnings before interest expense and taxes, earnings before interest expense,
interest income and taxes, earnings before interest expense, taxes, and
depreciation and/or amortization, earnings before interest expense, interest
income, taxes, and depreciation and/or amortization, return on equity or costs,
return on invested or average capital employed, or cumulative total return to
stockholders (in each case, whether compared to preselected peer groups or not).
3.12. PERFORMANCE PERIOD - each consecutive twelve-month period
commencing on January 1 of each year during the term of this Plan.
3.13. PLAN - this Deluxe Corporation 1996 Annual Incentive Plan.
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3.14. TARGET AWARD - a dollar amount or a percentage of Base Salary,
which may be greater or less than 100%, as determined by the Committee with
respect to each Participant for each Performance Period.
3.15. UNITS - Restricted Stock Units, as defined in the Deluxe
Corporation Stock Incentive Plan.
4. ADMINISTRATION.
4.1. POWER AND AUTHORITY OF COMPENSATION COMMITTEE. The Plan shall be
administered by the Compensation Committee. The Compensation Committee shall
have full power and authority, subject to all the applicable provisions of the
Plan and applicable law, to (a) establish, amend, suspend or waive such rules
and regulations and appoint such agents as it deems necessary or advisable for
the proper administration of the Plan, (b) construe, interpret and administer
the Plan and any instrument or agreement relating to the Plan, (c) determine,
from time to time, whether shares of Common Stock and/or Units will be made
available to Participants under the Plan, and (d) make all other determinations
and take all other actions necessary or advisable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, each determination made
and each action taken by the Compensation Committee pursuant to the Plan or any
instrument or agreement relating to the Plan shall be (x) within the sole
discretion of the Compensation Committee, (y) may be made at any time and (z)
shall be final, binding and conclusive for all purposes on all persons,
including, but not limited to, Participants and their legal representatives and
beneficiaries, and employees of the Company.
4.2 DELEGATION. The Compensation Committee may delegate its powers
and duties under the Plan to one or more officers of the Company or a committee
of such officers, subject to such terms, conditions and limitations as the
Compensation Committee may establish in its sole discretion; PROVIDED, HOWEVER,
that the Compensation Committee shall not delegate its power (a) to make
determinations regarding officers or directors of the Company who are subject to
Section 16 of the 1934 Act; or (b) in such a manner as would cause the Plan not
to comply with the provisions of Section 162(m) of the Code.
4.3. DETERMINATIONS MADE PRIOR TO EACH PERFORMANCE PERIOD. On or
before the 90th day of each Performance Period, the Compensation Committee
shall:
(a) designate all Participants (including designation as
Executives or Other Participants) for such Performance
Period;
(b) establish a Target Award for each Participant;
(c) with respect to each Participant, establish one or more
Performance Factors and a corresponding Maximum Award
Percentage for each Performance Factor;
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4.4. CERTIFICATION. Following the close of each Performance Period and
prior to payment of any amount to any Participant under the Plan, the Committee
must certify in writing the applicable Performance Factors for that Performance
Period (and the corresponding Maximum Award Percentages) have been achieved and
certify as to the attainment of all other factors upon which any payments to a
Participant for that Performance Period are to be based.
4.5. SHAREHOLDER APPROVAL. The material terms of this Plan shall be
disclosed to and approved by shareholders of the Company in accordance with
Section 162(m) of the Code. No amount shall be paid to any Participant under
this Plan unless such shareholder approval has been obtained.
5. INCENTIVE PAYMENT.
5.1. FORMULA. Each Participant shall receive an incentive payment
for each Performance Period in an amount not greater than:
(a) the Participant's Target Award for the Performance Period,
multiplied by
(b) the Participant's Maximum Award Percentage for the
Performance Period that corresponds to the Performance
Factor achieved by the Participant for that Performance
Period.
5.2. LIMITATIONS.
(a) DISCRETIONARY INCREASE OR REDUCTION. The Compensation
Committee shall retain sole and absolute discretion to
increase or reduce the amount of any incentive payment
otherwise payable to any Participant under this Plan, but
may not increase the payment to any Executive for any
Performance Period.
(b) CONTINUED EMPLOYMENT. Except as otherwise provided by the
Compensation Committee, no incentive payment under this
Plan with respect to a Performance Period shall be paid or
owed to a Participant whose employment terminates prior to
the last day of such Performance Period.
(c) MAXIMUM PAYMENTS. No Participant shall receive a payment
under this Plan for any Performance Period in excess of
$2.0 million.
6. BENEFIT PAYMENTS.
6.1. TIME AND FORM OF PAYMENTS. Prior to a date specified by the
Compensation Committee but in no event later than the 90th day of a Performance
Period, each Participant shall elect whether to receive benefits which may be
paid under the Plan in cash or in the form of shares of Common Stock or Units
(whichever is made available by the Compensation Committee
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to such Participant in the Compensation Committee's sole discretion) or some
combination thereof. Participants who elect to receive some percentage of the
incentive payment in the form of cash shall be entitled to elect, at the same
time as the cash election is made, to defer such receipt in accordance with the
terms of any Company deferred compensation plan in effect at the time and
applicable to such cash payment. In the event a Participant has elected to
receive some percentage of the incentive payment in the form of cash, and
subject to any such deferred compensation election, such cash incentive shall be
paid as soon as administratively feasible after the Compensation Committee has
made the certifications provided for in Section 4.4 above and otherwise
determined the amount of such Participant's incentive payment payable under this
Plan. In the event that a Participant chooses to receive some percentage of the
incentive payment in the form of shares or Units (as the case may be), in lieu
of cash (the "Share Dollar Amount"), the Participant shall be entitled to
receive shares of restricted Common Stock (or Units, as the case may be) equal
to 125% of the Share Dollar Amount pursuant to this Plan, based on the fair
market value of a share of Common Stock (as determined in accordance with the
terms of the Deluxe Corporation Stock Incentive Plan (the "Stock Incentive
Plan"), as of the date such shares or Units are to be issued or awarded,
respectively, after the Compensation Committee has made the certifications
provided for in Section 4.4 above and otherwise determined the amount of a
Participant's incentive payment payable under this Plan.
In the event a Participant has elected to receive some percentage
of the incentive payment in the form of shares of Common Stock or Units (as the
case may be), such shares or Units shall be issued or awarded, respectively,
pursuant to the Stock Incentive Plan, which shares or Units shall be subject to
such forfeiture rights and to such restrictions regarding transfer as may be
established by the Compensation Committee; PROVIDED, HOWEVER, that the
individual share limitation provided for in Section 4(d) of the Stock Incentive
Plan shall not apply to shares issued under this Plan.
6.2. NONTRANSFERABILITY. Except as otherwise determined by the
Compensation Committee, no right to any incentive payment hereunder, whether
payable in cash or other property, shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution; PROVIDED
HOWEVER, that if so determined by the Compensation Committee, a Participant may,
in the manner established by the Compensation Committee (i) designate a
beneficiary or beneficiaries to exercise the rights of the Participant and
receive any cash or property hereunder upon the death of the Participant, or
(ii) transfer any rights to any cash incentive payment hereunder to any member
of such Participant's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or any successor rule or
regulation) or to a trust whose beneficiaries are members of such Participant's
"immediate family." No right to any incentive payment hereunder may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company.
6.3. TAX WITHHOLDING. In order to comply with all applicable
federal or state income, social security, payroll, withholding or other tax laws
or regulations, the Compensation Committee may establish such policy or policies
as it deems appropriate with respect to such
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laws and regulations, including without limitation, the establishment of
policies to ensure that all applicable federal or state income, social security,
payroll, withholding or other taxes, which are the sole and absolute
responsibility of the Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or part of the
federal and state taxes to be withheld or collected upon receipt or payment of
(or the lapse of restrictions relating to) an incentive payment payable
hereunder, the Compensation Committee, in its sole discretion and subject to
such additional terms and conditions as it may adopt, may permit the Participant
to satisfy such tax obligation by (a) electing to have the Company withhold a
portion of the shares of Common Stock otherwise to be delivered upon payment of
(or the lapse of restrictions relating to) an incentive payment hereunder with a
fair market value equal to the amount of such taxes or (b) delivering to the
Company shares of Common Stock other than the shares issuable upon payment of
(or the lapse of restrictions relating to) such incentive payment with a fair
market value equal to the amount of such taxes.
7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent prohibited
by applicable law and unless otherwise expressly provided in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate
the Plan, without the approval of the shareholders of the
Company, except that no such amendment, alteration,
suspension, discontinuation or termination shall be made
that, absent such approval:
(i) would cause Rule 16b-3 to become unavailable with
respect to the Plan; or
(ii) would violate the rules or regulations of the
New York Stock Exchange, any other securities
exchange or the National Association of Securities
Dealers, Inc. that are applicable to the Company.
(b) WAIVERS OF INCENTIVE PAYMENT CONDITIONS OR RIGHTS. The
Compensation Committee may waive any conditions of or
rights of the Company under any right to an incentive
payment hereunder, prospectively or retroactively.
(c) LIMITATION ON AMENDMENTS TO INCENTIVE PAYMENT RIGHTS.
Neither the Compensation Committee nor the Company may
amend, alter, suspend, discontinue or terminate any rights
to an incentive payment, prospectively or retroactively,
without the consent of the Participant or holder or
beneficiary thereof, except as otherwise herein provided.
(d) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The
Compensation Committee may correct any defect, supply any
omission or
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reconcile any inconsistency in the Plan in the manner
and to the extent it shall deem desirable to carry the Plan
into effect.
8. MISCELLANEOUS.
8.1. EFFECTIVE DATE. This Plan shall be deemed effective, subject to
shareholder approval, as of January 1, 1996.
8.2. TERM OF THE PLAN. Unless the Plan shall have been discontinued or
terminated, the Plan shall terminate on December 31, 2000. No right to receive
an incentive payment shall be granted after the termination of the Plan.
However, unless otherwise expressly provided in the Plan, any right to receive
an incentive payment theretofore granted may extend beyond the termination of
the Plan, and the authority of the Board of Directors and Compensation Committee
to amend or otherwise administer the Plan shall extend beyond the termination of
the Plan.
8.3. HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
8.4. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and
inure to the benefit of the Company and each Participant, the successors and
assigns of the Company, and the beneficiaries, personal representatives and
heirs of each Participant. If the Company becomes a party to any merger,
consolidation or reorganization, this Plan shall remain in full force and effect
as an obligation of the Company or its successors in interest (except to the
extent modified by the terms of the Stock Incentive Plan with respect to the
shares of restricted Common Stock issued under Section 6.1 hereof).
8.5. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
affiliate of the Company, to terminate, with or without cause, any Participant's
employment at any time. This Plan shall not replace any contract of employment,
whether oral or written, between the Company and any Participant, but shall be
considered a supplement thereto. This Plan is in addition to, and not in lieu
of, any other employee benefit plan or program in which any Participant may be
or become eligible to participate by reason of employment with the Company. No
compensation or benefit awarded to or realized by any Participant under the Plan
shall be included for the purpose of computing such Participant's compensation
under any compensation-based retirement, disability, or similar plan of the
Company unless required by law or otherwise provided by such other plan.
8.6. NO TRUST OR FUND CREATED. This Plan shall not create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a Participant or any other
person. To the extent that any person acquires a right to
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receive payments from the Company or any affiliate pursuant to this Plan, such
right shall be no greater than the right of any unsecured general creditor of
the Company or of any affiliate.
8.7. GOVERNING LAW. The validity, construction and effect of the Plan
or any incentive payment payable under the Plan shall be determined in
accordance with the laws of the State of Minnesota.
8.8. SEVERABILITY. If any provision of the Plan is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be so construed or deemed amended without, in the determination of
the Compensation Committee, materially altering the purpose or intent of the
Plan, such provision shall be stricken as to such jurisdiction, and the
remainder of the Plan shall remain in full force and effect.
8.9. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
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DELUXE CORPORATION STOCK INCENTIVE PLAN
(AS AMENDED)
SECTION 1. PURPOSE.
The purpose of the plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting management personnel capable of
assuring the future success of the Company, by offering such personnel
incentives to put forth maximum efforts for the success of the Company's
business, and by affording such personnel an opportunity to acquire a
proprietary interest in the Company.
SECTION 2. DEFINITIONS.
As used in the plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the committee.
(b) "Award" shall mean any option, stock appreciation right, restricted
stock, restricted stock unit, performance award, dividend equivalent or other
stock-based award granted under the plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any award granted under the plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the board of directors of the
Company designated by such board to administer the plan, which shall consist of
members appointed from time to time by the board of directors and shall be
comprised of not fewer than such number of directors as shall be required to
permit the plan to satisfy the requirements of Rule 16b-3. Each member of the
committee shall be a "disinterested person" within the meaning of Rule 16b-3 and
an "outside director" within the meaning of Section 162(m) of the Code.
(f) "Company" shall mean DELUXE CORPORATION, a Minnesota corporation, and
any successor corporation.
(g) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the plan.
(h) "Eligible Person" shall mean any employee (as determined by the
committee) providing services to the Company or any affiliate who the committee
determines to be an eligible person. A non-employee director shall not be an
eligible person.
(i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the committee.
(j) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision.
(k) "Non-Employee Director" shall have the meaning provided in Section 7.1
of the plan.
(l) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the plan that is not intended to be an incentive stock option.
(m) "Option" shall mean an incentive stock option or a non-qualified stock
option.
(n) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the plan.
(o) "Participant" shall mean an eligible person designated to be granted
an award under the plan.
(p) "Performance Award" shall mean any right granted under Section 6(d) of
the plan.
(q) "Person" shall mean any individual, corporation, partnership,
association or trust.
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(r) "Plan" shall mean this stock incentive plan, as amended from time to
time.
(s) "Restricted Stock" shall mean any share granted under Section 6(c) of
the plan.
(t) "Restricted Stock Unit" shall mean any unit granted under Section 6(c)
of the plan evidencing the right to receive a share (or a cash payment equal to
the fair market value of a share) at some future date.
(u) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation.
(v) "Shares" shall mean shares of common stock, $1.00 par value, of the
Company or such other securities or property as may become subject to awards
pursuant to an adjustment made under Section 4(c) of the plan.
(w) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the plan.
SECTION 3. ADMINISTRATION.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The plan shall be administered by
the committee. Except as provided in Section 7 and subject to the express
provisions of the plan and to applicable law, the committee shall have full
power and authority to: (i) designate participants; (ii) determine the type or
types of awards to be granted to each participant under the plan; (iii)
determine the number of shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with) each
award; (iv) determine the terms and conditions of any award or award agreement;
(v) amend the terms and conditions of any award or award agreement and
accelerate the exercisability of options or the lapse of restrictions relating
to restricted stock or other awards; (vi) determine whether, to what extent and
under what circumstances awards may be exercised in cash, shares, other
securities, other awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
shares, other securities, other awards, other property and other amounts payable
with respect to an award under the plan shall be deferred either automatically
or at the election of the holder thereof or the committee; (viii) interpret and
administer the plan and any instrument or agreement relating to, or award made
under, the plan; (ix) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the plan; and (x) make any other determination and take any
other action that the committee deems necessary or desirable for the
administration of the plan. Unless otherwise expressly provided in the plan, all
designations, determinations, interpretations and other decisions under or with
respect to the plan or any award shall be within the sole discretion of the
committee, may be made at any time and shall be final, conclusive and binding
upon any participant, any holder or beneficiary of any award and any employee of
the Company or any affiliate.
(b) DELEGATION. The committee may delegate its powers and duties under the
plan to one or more officers of the company or an affiliate or a committee of
such officers, subject to such terms, conditions and limitations as the
committee may establish in its sole discretion; provided, however, that the
committee shall not delegate its powers and duties under the plan (i) with
regard to officers or directors of the Company or any affiliate who are subject
to Section 16 of the Securities Exchange Act of 1934, as amended, or (ii) in
such a manner as would cause the plan not to comply with the requirements of
Section 162(m) of the Code.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(c), the
number of shares available for granting awards under the plan shall be
7,000,000. Shares to be issued under the plan may be either shares reacquired or
authorized but unissued shares. If any shares covered by an award or to which an
award relates are not purchased or are forfeited, or if an award otherwise
terminates without delivery of any shares, then the number of shares counted
against the aggregate number of shares available under the plan with respect to
such award, to the extent of any such forfeiture or termination, shall again be
available for grants under the plan.
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if an award
entitles the holder thereof to receive or purchase shares, the number of shares
covered by such award or to which such award relates shall be counted on the
date of grant of such award against the aggregate number of shares available for
grants under the plan.
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(c) ADJUSTMENTS. In the event that the committee shall determine that any
dividend or other distribution (whether in the form of cash, shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of shares or other securities of the Company, issuance of
warrants or other rights to purchase shares or other securities of the Company
or other similar corporate transaction or event affects the shares such that an
adjustment is determined by the committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the plan, then the committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of shares (or
other securities or other property) which thereafter may be made the subject of
awards, (ii) the number and type of shares (or other securities or other
property) subject to outstanding awards and (iii) the purchase or exercise price
with respect to any award; provided, however, that the number of shares covered
by any award or to which such award relates shall always be a whole number.
(d) AWARDS LIMITATION UNDER THE PLAN. No eligible person may be granted any
award or awards under the plan (including the Company's performance share plan)
of more than 200,000 shares, in the aggregate, in any calendar year. The
foregoing limitation shall not include any shares acquired pursuant to the
annual incentive plan. Furthermore, no more than 1,000,000 shares, in the
aggregate, may be issued under the plan (including the Company's performance
share plan) in the form of either restricted stock or restricted stock units or
any combination thereof.
SECTION 5. ELIGIBILITY.
Any eligible person, including any eligible person who is an officer or
director of the Company or any affiliate, shall be eligible to be designated a
participant. In determining which eligible persons shall receive an award and
the terms of any award, the committee may take into account the nature of the
services rendered by the respective eligible persons, their present and
potential contributions to the success of the Company, and such other factors as
the committee, in its discretion shall deem relevant. Notwithstanding the
foregoing, incentive stock options may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an incentive stock option shall not be
granted to an employee of an affiliate unless such affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.
SECTION 6. AWARDS.
(a) OPTIONS. The committee is hereby authorized to grant options to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
(i) EXERCISE PRICE. The purchase price per share purchasable under an
option shall be determined by the committee; provided, however, that such
purchase price shall not be less than 100 percent of the fair market value of a
share on the date of grant of such option.
(ii) OPTION TERM. The term of each option shall be fixed by the
committee.
(iii) TIME AND METHOD OF EXERCISE. The committee shall determine
the time or times at which an option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, shares, promissory notes, other securities, other awards or
other property, or any combination thereof, having a fair market value on the
exercise date equal to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made or deemed to have been made.
(b) STOCK APPRECIATION RIGHTS. The committee is hereby authorized to grant
stock appreciation rights to participants subject to the terms of the plan and
any applicable award agreement. A stock appreciation right granted under the
plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the fair market value of one share on the date of exercise
(or, if the committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the stock
appreciation right as specified by the committee, which price shall not be less
than 100 percent of the fair market value of one share on the date of grant of
the stock appreciation right. Subject to the terms of the plan and any
applicable award agreement, the grant price, term, methods of exercise, dates of
exercise, methods of settlement and any other terms and conditions of any stock
appreciation right shall be as
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determined by the committee. The committee may impose such conditions or
restrictions on the exercise of any stock appreciation right as it may deem
appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The committee is hereby
authorized to grant awards of restricted stock and restricted stock units to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
(i) RESTRICTIONS. Shares of restricted stock and restricted stock
units shall be subject to such restrictions as the committee
may impose (including, without limitation, any limitation on
the right to vote a share of restricted stock or the right to
receive any dividend or other right or property with respect
thereto or with respect to a restricted stock unit), which
restrictions may lapse separately or in combination at such
time or times, in such installments or otherwise as the
committee may deem appropriate.
(ii) STOCK CERTIFICATES. Any restricted stock granted under the plan
shall be evidenced by issuance of a stock certificate or
certificates, which certificate or certificates shall be held
by the Company. Such certificate or certificates shall be
registered in the name of the participant and shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to such restricted stock. In the case
of restricted stock units, no shares shall be issued at the
time such awards are granted.
(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise determined
by the committee, upon termination of employment (as determined
under criteria established by the committee) during the
applicable restriction period, all shares of restricted stock
and all restricted stock units at such time subject to
restriction shall be forfeited and reacquired by the Company;
provided, however, that the committee may, when it finds that a
waiver would be in the best interest of the Company, waive in
whole or in part any or all remaining restrictions with respect
to shares of restricted stock or restricted stock units. Any
share representing restricted stock that is no longer subject
to restrictions shall be delivered to the holder thereof
promptly after the applicable restrictions lapse or are waived.
Upon the lapse or waiver of restrictions and the restricted
period relating to restricted stock units evidencing the right
to receive shares, such shares shall be issued and delivered to
the holders of the restricted stock units, subject to the
provisions of the plan and any applicable award agreement.
(d) PERFORMANCE AWARDS. The committee is hereby authorized to grant
performance awards to participants subject to the terms of the plan and any
applicable award agreement. A performance award granted under the plan (i) may
be denominated or payable in cash, shares (including, without limitation,
restricted stock and restricted stock units), other securities, other awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the committee shall establish. Subject to the
terms of the plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any performance award granted, the amount of any payment or
transfer to be made pursuant to any performance award, and any other terms and
conditions of any performance award shall be determined by the committee.
(e) DIVIDEND EQUIVALENTS. The committee is hereby authorized to grant to
participants dividend equivalents under which such participants shall be
entitled to receive payments (in cash, shares, other securities, other awards or
other property as determined in the discretion of the committee) equivalent to
the amount of cash dividends paid by the Company to holders of shares with
respect to a number of shares determined by the committee. Subject to the terms
of the plan and any applicable award agreement, such dividend equivalents may
have such terms and conditions as the committee shall determine.
(f) OTHER STOCK-BASED AWARDS. The committee is hereby authorized to grant
to participants such other awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, shares
(including, without limitation, securities convertible into shares), as are
deemed by the committee to be consistent with the purpose of the plan; provided,
however, that such grants must comply with Rule 16b-3 and applicable law.
Subject to the terms of the plan and any applicable award agreement, the
committee shall determine the terms and conditions of such awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including, without limitation,
cash,
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shares, promissory notes, other securities, other awards or other property or
any combination thereof), as the committee shall determine, the value of which
consideration, as established by the committee, shall not be less than 100
percent of the fair market value of such shares or other securities as of the
date such purchase right is granted.
(g) GENERAL
(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for
no cash consideration or for such minimal cash consideration as
may be required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in
the discretion of the committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other
award or any award granted under any plan of the Company or any
affiliate other than the plan. Awards granted in addition to or
in tandem with other awards or in addition to or in tandem with
awards granted under any such other plan of the Company or any
affiliate, may be granted either at the same time as or at a
different time from the grant of such other award or awards.
(iii) FORMS OF PAYMENTS UNDER AWARDS. Subject to the terms of the
plan and of any applicable award agreement, payments or
transfers to be made by the Company or an affiliate upon the
grant, exercise or payment of an award may be made in such form
or forms as the committee shall determine (including, without
limitation, cash, shares, promissory notes, other securities,
other awards or other property or any combination thereof), and
may be made in a single payment or transfer, in installments or
on a deferred basis, in each case in accordance with rules and
procedures established by the committee. Such rules and
procedures may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of dividend
equivalents with respect to installment or deferred payments.
(iv) LIMITS ON TRANSFER OF AWARDS. No award and no right under any
such award shall be transferable by a participant otherwise
than by will or by the laws of descent and distribution;
provided, however, that if so determined by the committee, a
participant may, in the manner established by the committee,
(x) designate a beneficiary or beneficiaries to exercise the
rights of the participant and receive any property
distributable with respect to any award upon the death of the
participant, or (y) transfer an award (other than an incentive
stock option) to any member of such participant's "immediate
family" (as such term is defined in Rule 16a-1(e) promulgated
by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, or any successor rule or
regulation) or to a trust whose beneficiaries are members of
such participant's "immediate family." Each award or right
under any award shall be exercisable during the participant's
lifetime only by the participant, or by a member of such
participant's immediate family or a trust for members of such
immediate family pursuant to a transfer as described above, or
if permissible under applicable law, by the participant's
guardian or legal representative. No award or right under any
such award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the
Company or any affiliate.
(v) TERM OF AWARDS. The term of each award shall be for such period
as may be determined by the committee.
(vi) RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates for
shares or other securities delivered under the plan pursuant to
any award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the committee may
deem advisable under the plan or the rules, regulations and
other requirements of the Securities and Exchange Commission
and any applicable federal or state securities laws, and the
committee may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such
restrictions. If the shares or other securities are traded on a
securities exchange, the Company shall not be required to
deliver any shares or other securities covered by an award
unless and until such shares or other securities have been
admitted for trading on such securities exchange.
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SECTION 7. AWARDS AND OPTIONS TO NON-EMPLOYEE DIRECTORS.
7.1 ELIGIBILITY. If this plan is approved by the shareholders of the
Company at the annual meeting of the shareholders in 1994 (the 1994 annual
meeting), shares of restricted stock and options shall be granted automatically
under the plan to each member of the board of directors who is not an employee
of the Company or of any affiliate of the Company (a non-employee director)
under the terms and conditions contained in this Section 7. The authority of the
committee under this Section 7 shall be limited to ministerial and
non-discretionary matters.
7.2 ONE-TIME AWARD OF RESTRICTED STOCK. Upon the date of the 1994 annual
meeting, each non-employee director in office following the meeting shall
receive an award of 1,000 shares of restricted stock. These shares shall vest in
three equal installments, on the dates of the annual shareholder meeting in each
of the three succeeding years, if such director remains in office immediately
following such meeting. In the event that in accordance with the Company's
policy with respect to mandatory retirement of directors, any director is not
nominated for election to serve as a director of the Company, all restricted
stock so awarded shall immediately vest in full upon such director's retirement
from the board. Subsequent to the date of the 1994 annual meeting, each
non-employee director shall, upon the date of his or her initial election to the
board, receive an award of 1,000 shares of restricted stock subject to the same
vesting restrictions. If a director ceases to be a director prior to the date on
which the award is fully vested for any reason other than mandatory retirement,
any unvested portion of the award shall terminate and be irrevocably forfeited.
Such awards shall be subject to Sections 6(c), 9 and 10 of this plan.
7.3 ANNUAL OPTION GRANTS. Each non-employee director shall be granted an
option to purchase 1,000 shares on the date of the annual meeting of
shareholders each year, commencing with the 1994 annual meeting, if the director
will remain in office immediately following such meeting. The exercise price of
each option shall be equal to 100 percent of the fair market value per share on
the date of grant. Such options shall be non-qualified stock options, shall
become exercisable six months after the date of grant, and shall terminate on
the tenth anniversary of the date of grant, unless previously exercised or
terminated. Such options shall be subject to the terms and conditions of
Sections 6(a), 9 and 10 of the plan and to other standard terms and conditions
contained in the form of non-qualified stock option used by the Company from
time to time. Such options shall also terminate three months following the date
upon which the participant ceases to be a director of the Company, except that:
(i) In the event that a director who is granted an option shall
cease to be a director of the Company by reason of such
director's willful and material misconduct, the option shall
terminate as of the date of such misconduct, and
(ii) If a director who is granted an option shall die while a
director of the Company or within three months after he or she
ceases to be a director of the Company for any reason other
than willful and material misconduct, or if such director
ceases to be a director of the Company by reason of his or her
disability, and he or she shall not have fully exercised the
option, the option may be exercised at any time within 12
months after such director's death, or 12 months after
cessation of directorship, by such director's legal
representatives, or devisees, but only to the extent of the
full number of shares such director was entitled to purchase
under the option on the date of death or cessation of
directorship.
7.4 AMENDMENTS TO SECTION 7. The provisions of this Section 7 may not be
amended more often than once every six months other than to comply with changes
in the Code or the Employee Retirement Income Security Act of 1974, as amended,
or the respective rules promulgated under either statute.
SECTION 8. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an award agreement or in the plan:
(a) AMENDMENTS TO THE PLAN. The board of directors of the Company may
amend, alter, suspend, discontinue or terminate the plan; provided, however,
that, notwithstanding any other provision of the plan or any award agreement,
without the approval of the shareholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) would cause Rule 16b-3 to become unavailable with respect to the plan;
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(ii) would violate the rules or regulations of the New York Stock Exchange,
any other securities exchange or the National Association of
Securities Dealers, Inc., that are applicable to the Company; or
(iii) would cause the Company to be unable, under the Code, to grant
incentive stock options under the plan.
(b) WAIVERS. The committee may waive any conditions of or rights of the
Company under any outstanding award, prospectively or retroactively.
(c) LIMITATIONS ON AMENDMENTS. Neither the committee nor the Company may
amend, alter, suspend, discontinue or terminate any outstanding award,
prospectively or retroactively, without the consent of the participant or holder
or beneficiary thereof, except as otherwise provided herein or in the award
agreement.
(d) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The committee
may correct any defect, supply any omission or reconcile any inconsistency in
the plan or any award in the manner and to the extent it shall deem desirable to
carry the plan into effect.
SECTION 9. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal or state income tax laws or
regulations, the committee may establish such policy or policies as it deems
appropriate with respect to such laws and regulations, including without
limitation the establishment of policies to ensure that all applicable federal
or state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a participant, are withheld or collected from such
participant. In order to assist a participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an award, the committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the payment or transfer otherwise to be
made upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes or (ii)
delivering to the Company shares or other property other than shares issuable
upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes. The election,
if any, must be on or before the date that the amount of tax to be withheld is
determined.
SECTION 10. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. No eligible person, participant or other person
shall have any claim to be granted any award under the plan, and there is no
obligation for uniformity of treatment of eligible persons, participants or
holders or beneficiaries of awards under the plan. The terms and conditions of
awards need not be the same with respect to any participant or with respect to
different participants.
(b) AWARD AGREEMENTS. No participant will have rights under an award
granted to such participant unless and until an award agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the participant.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
plan shall prevent the Company or any affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(d) NO RIGHT TO EMPLOYMENT. The grant of an award shall not be construed
as giving a participant the right to be retained in the employ of the Company or
any affiliate, nor will it affect in any way the right of the Company or the
affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an affiliate may at any time dismiss a participant from
employment free from any liability or any claim under the plan, unless otherwise
expressly provided in the plan or in any award agreement.
(e) GOVERNING LAW. The validity, construction and effect of the plan or
any award, and any rules and regulations relating to the plan or any award,
shall be determined in accordance with the laws of the State of Minnesota.
(f) SEVERABILITY. If any provision of the plan or any award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the plan or any award under any law deemed applicable by the
committee, such provision shall be construed or deemed amended to conform to
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applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the committee, materially altering the purpose or intent of
the plan or the award, such provision shall be stricken as to the plan or such
jurisdiction or award, and the remainder of the plan or any such award shall
remain in full force and effect.
(g) NO TRUST OR FUND CREATED. Neither the plan nor any award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any affiliate pursuant to an award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
affiliate.
(h) NO FRACTIONAL SHARES. No fractional shares shall be issued or
delivered pursuant to the plan or any award, and the committee shall determine
whether cash shall be paid in lieu of any fractional shares or whether such
fractional shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) HEADINGS. Headings are given to the sections and subsections of the
plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the plan or any provision thereof.
(j) OTHER BENEFITS. No compensation or benefit awarded to or realized by
any participant under the plan shall be included for the purpose of computing
such participant's compensation under any compensation-based retirement,
disability, or similar plan of the Company unless required by law or otherwise
provided by such other plan.
SECTION 11. SECTION 16(b) COMPLIANCE.
The plan is intended to comply in all respects with Rule 16b-3 or any
successor provision, as in effect from time to time and in all events the plan
shall be construed in accordance with the requirements of Rule 16b-3. If any
plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The board of directors,
in its absolute discretion, may bifurcate the plan so as to restrict, limit or
condition the use of any provision of the plan to participants who are officers
or directors subject to Section 16 of the Securities and Exchange Act of 1934,
as amended, without so restricting, limiting or conditioning the plan with
respect to other participants.
SECTION 12. EFFECTIVE DATE OF THE PLAN.
The plan shall be effective as of December 22, 1993, subject to approval by
the shareholders of the Company within one year thereafter.
SECTION 13. TERM OF THE PLAN.
Unless the plan shall have been discontinued or terminated as provided in
Section 8(a), the plan shall terminate on December 31, 2000. No award shall be
granted after the termination of the plan. However, unless otherwise expressly
provided in the plan or in an applicable award agreement, any award theretofore
granted may extend beyond the termination of the plan, and the authority of the
committee provided for hereunder with respect to the plan and any awards, and
the authority of the board of directors of the Company to amend the plan, shall
extend beyond the termination of the plan.
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DELUXE CORPORATION
PERFORMANCE SHARE PLAN
(AS AMENDED 5/6/96)
SECTION I. ESTABLISHMENT
On February 10, 1994, the Board of Directors of Deluxe Corporation (the
"Company"), upon recommendation by the Compensation Committee of the Board of
Directors (the "Committee"), approved an incentive plan for executives as
described herein, which plan shall be known as the "Deluxe Corporation
Performance Share Plan" (the "Plan"). The Plan shall be submitted for approval
by the shareholders of the Company at the 1994 Annual Meeting of Shareholders.
The Plan shall be effective as of January 1, 1994, subject to its approval by
the shareholders of the Company, and no benefits shall be issued pursuant to the
Plan until after the Plan has been approved by the shareholders of the Company.
SECTION II. PURPOSE
The purpose of the Plan is to advance the interests of the Company and
its shareholders by attracting and retaining key employees, and by stimulating
the efforts of such employees to contribute to the continued success and growth
of the business of the Company. The Plan is further intended to provide such
employees with an opportunity to increase their ownership of the Company's
common stock and, thereby, to increase their personal interest in the long-term
success of the business in a manner designed to increase shareholder value.
SECTION III. ADMINISTRATION
3.1 COMPOSITION OF THE COMMITTEE. The Plan shall be administered by
the Committee, which shall consist of members appointed from time to time by the
Board of Directors and shall be comprised of not less than such number of
directors as shall be required to permit the Plan to satisfy the requirements of
Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule or regulation ("Rule 16b-3"). All members of the Committee shall
be members of the Board of Directors of the Company who are "disinterested
persons" within the meaning of Rule 16b-3. In addition, to the extent required
by Section 162(m) of the Internal Revenue Code of 1986, as amended (such
statute, as it may be amended from time to time and all proposed temporary or
final Treasury Regulations promulgated thereunder shall be referred to as the
"Code"), at all times following the 1995 Annual Meeting of Shareholders of the
Company, all members of the Committee shall be "outside directors" within the
meaning of Section 162(m) of the Code.
<PAGE>
3.2 POWER AND AUTHORITY OF THE COMMITTEE. The Committee shall have
full power and authority, subject to all the applicable provisions of the Plan
and applicable law, to (a) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it deems necessary or advisable for the
proper administration of the Plan, (b) construe, interpret and administer the
Plan and any instrument or agreement relating to, or Award (as defined below in
Section 4.2) made under, the Plan, and (c) make all other determinations and
take all other actions necessary or advisable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, each determination made
and each action taken by the Committee pursuant to the Plan or any instrument or
agreement relating to, or Award made under, the Plan shall be (x) within the
sole discretion of the Committee, (y) may be made at any time and (z) shall be
final, binding and conclusive for all purposes on all persons, including, but
not limited to, holders of Awards, and their legal representatives and
beneficiaries, and employees of the Company or of any "Affiliate" of the
Company. For purposes of the Plan and any instrument or agreement relating to,
or Award made under, the Plan, the term "Affiliate" shall mean any entity that,
directly or indirectly through one or more intermediaries, is controlled by the
Company and any entity in which the Company has a significant equity interest,
in each case as determined by the Committee in its sole discretion.
3.3 DELEGATION. The Committee may delegate its powers and duties
under the Plan to one or more officers of the Company or any Affiliate or a
committee of such officers, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion; provided, however, that the
Committee shall not delegate its power (a) to make determinations regarding
officers or directors of the Company or any Affiliate who are subject to Section
16 of the Exchange Act; or (b) in such a manner as would cause the Plan not to
comply with the provisions of Section 162(m) of the Code.
SECTION IV. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. The Plan is unfunded and is maintained by the
Company for a select group of management or highly compensated employees. In
order to be eligible to participate in the Plan, an employee of the Company or
of its Affiliates must be selected by the Committee. In determining the
employees who will participate in the Plan, the Committee may take into account
the nature of the services rendered by the respective employees, their present
and potential contributions to the success of the Company and such other factors
as the Committee, in its sole discretion, shall deem relevant. A director of
the Company or of an Affiliate who is not also an employee of the Company or an
Affiliate shall not be eligible to participate in the Plan.
4.2 PARTICIPATION. The Committee shall determine the employees to be
granted an award opportunity (the "Award"), the amount of each Award, the time
or times when Awards will be made, the period of time over which such Awards are
intended to be earned, and all other terms and conditions of each Award. The
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provisions of the Awards need not be the same with respect to any recipient of
an Award (the "Participant") or with respect to different Participants. The
Committee's decision to approve an Award to an employee at any time shall not
require the Committee to approve a similar Award or any Award at all to that
employee or any other employee or person at any future date. The Company and
the Committee shall not have any obligation for uniformity of treatment of any
person, including, but not limited to, Participants and their legal
representatives and beneficiaries and employees of the Company or of any
Affiliate of the Company.
4.3 AWARD AGREEMENT. Any employee selected for participation by the
Committee shall, if requested by the Committee, execute and return to the
Committee a written agreement setting forth the terms and conditions of the
Award (the "Award Agreement"). A separate Award Agreement may be entered into
between the Company and each Participant for each Award.
4.4 QUALIFIED PERFORMANCE-BASED COMPENSATION. Awards granted pursuant
to the Plan are intended to be "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code. Accordingly, all of the other terms
and conditions of the Plan as it applies to any Award shall be interpreted in
such a fashion so as to qualify all compensation paid thereunder as "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
4.5 MAXIMUM SHARE LIMITATIONS. No Participant may be granted an Award
or Awards of any Stock Units (as defined below in Section 5.1) or Shares (as
defined below in Section 5.6) under this Plan (i) and under any other
stock-based benefit plan adopted by the Company (including the Stock Incentive
Plan as defined in Section 5.1) of more than 200,000 Shares in the aggregate in
any calendar year or (ii) of more than 120,000 Shares in the aggregate during
the period from January 1, 1994 through December 31, 2000; provided, however,
that, for purposes of calculating the limitation in clause (i), any Shares
acquired pursuant to the Deluxe Corporation Annual Incentive Plan or the Deluxe
Corporation 1996 Annual Incentive Plan shall not be taken into account.
4.6 EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
Affiliate of the Company, to terminate, with or without cause, any Participant's
employment at any time. This Plan shall not replace any contract of employment,
whether oral or written, between the Company and any Participant, but shall be
considered a supplement thereto. This Plan is in addition to, and not in lieu
of, any other employee benefit plan or program in which any Participant may be
or become eligible to participate by reason of employment with the Company. No
compensation or benefit awarded to or realized by any Participant under the Plan
shall be included for the purpose of computing such Participant's compensation
under
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any compensation-based retirement, disability, or similar plan of the Company
unless required by law or otherwise provided by such other plan.
SECTION V. AWARDS
5.1 GENERAL. The Committee shall determine that Award or Awards to be
made to each Participant, and each Award shall be subject to the terms and
conditions of the Plan and the applicable Award Agreement. An Award shall be
made in the form of units equivalent to Shares (the "Stock Units"). Awards may
be granted singly or in combination, or in addition to, in tandem with or in
substitution for any grants or rights under any employee or compensation plan of
the Company or of any Affiliate, including the Deluxe Corporation Stock
Incentive Plan (the "Stock Incentive Plan"). All or part of an Award may be
subject to conditions and forfeiture provisions established by the Committee,
and set forth in the Award Agreement, which may include, but are not limited to,
continuous service with the Company or an Affiliate.
5.2 BUSINESS CRITERIA FOR PERFORMANCE-BASED AWARDS. The right to have
an Award vest or become payable in any fashion shall be determined solely on
account of the attainment of one pre-established, objective performance goal
selected by the Committee at the time of the grant of the Award. Such goal
shall be based solely on the Company's total return to shareholders during a
period selected by the Committee (a "Performance Period") as compared to the
total return to shareholders of companies comprising the Standard & Poor's 500
Company Stock Index (the "S & P 500") during a measurement period (a
"Measurement Period") selected by the Committee, which Measurement Period need
not be the same as the Performance Period. The Performance Period and
Measurement Period with respect to each Award shall be designated by the
Committee in its sole discretion at the time of the grant of the Award. Total
return to shareholders shall mean appreciation in share price between the date
of grant and the end of the applicable Performance Period or Measurement Period,
plus dividends paid during such period.
5.3 AWARD OF STOCK UNITS. All Awards shall be granted in the form of
Stock Units. No certificates shall be issued with respect to such Stock Units,
but the Company shall maintain a bookkeeping account in the name of the
Participant to which the Stock Units shall relate. Each Stock Unit shall
represent the right to receive a payment of one or more Shares of the Company's
Common Stock or a continuing Stock Unit, or other Awards, or a combination
thereof, with such restrictions and conditions as the Committee may determine in
its sole discretion, including, but not limited to, the issuance of Shares as
restricted stock legended to indicate restrictions on transferability.
5.4 DIVIDEND EQUIVALENTS. The Committee, in its sole discretion, may
provide that any Award may earn dividend equivalents as provided in the Stock
Incentive Plan.
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5.5 PAYMENT OF AWARDS; MINIMUM ACHIEVEMENT FOR PAYMENT. Payment of
Awards may be made at such times, with such restrictions and conditions, and in
such forms (Shares, including restricted Shares, Stock Units, other Awards, or
combinations thereof) as the Committee in its sole discretion may determine at
the time of grant of the Awards. Notwithstanding any other provision of the
Plan to the contrary, a payment will not be made with respect to any Award or
any Stock Unit included as part of an Award for any Performance Period unless
the Company's total return to shareholders for the Performance Period is at
least equal to the total return to shareholders for companies in the 50th
percentile of the S & P 500 for the Measurement Period.
5.6 STOCK INCENTIVE PLAN. All shares ("Shares") of Company Common
Stock, $1.00 par value, to be issued under the Plan shall be issued pursuant to
the Stock Incentive Plan to be voted upon for approval by the shareholders of
the Company at the 1994 Annual Meeting of Shareholders. Accordingly, such
Shares shall be subject to all of the additional terms and conditions of Stock
Incentive Plan. In the event the Stock Incentive Plan is not so approved by the
Company's shareholders, this Plan shall be of no effect, as described in Section
9.1 hereof.
SECTION VI. TERMINATION OF EMPLOYMENT
Each Award Agreement shall include provisions governing the disposition
of an Award in the event of the retirement, disability, death or other
termination of a Participant's employment with the Company or an Affiliate.
SECTION VII. NON-TRANSFERABILITY
Except as otherwise determined by the Committee or as set forth in the
applicable Award Agreement, no Award and no right under any Award shall be
transferable by a Participant otherwise than by will or by the laws of descent
and distribution; provided however, that if so determined by the Committee, a
Participant may, in the manner established by the Committee, (i) designate a
beneficiary or beneficiaries to exercise the rights of the Participant and
receive any property distributable with respect to any Award upon the death of
the Participant, or (ii) transfer any Award to any member of such Participant's
"immediate family" (as such term is defined in Rule 16a-1(e) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation) or to a trust whose beneficiaries
are members of such Participant's "immediate family." Each Award or right under
any Award shall be exercisable during a Participant's lifetime only by the
Participant, or by a member of such Participant's "immediate family" or a trust
for members of such "immediate family" pursuant to a transfer as described
above, or if permissible under applicable law, by the Participant's guardian or
legal representative. No Award or right under any Award may be pledged,
alienated, attached or otherwise encumbered and any purported pledge,
alienation,
5
<PAGE>
attachment or encumbrance thereof shall be void and unenforceable against the
Company or any Affiliate of the Company.
SECTION VIII. TAXES
In order to comply with all applicable federal or state income, social
security, payroll, withholding or other tax laws or regulations, the Committee
may establish such policy or policies as it deems appropriate with respect to
such laws and regulations, including without limitation, the establishment of
policies to ensure that all applicable federal or state income, social security,
payroll, withholding or other taxes, which are the sole and absolute
responsibility of the Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or part of the
federal and state taxes to be withheld or collected upon receipt or payment of
(or the lapse of restrictions relating to) an Award, the Committee, in its sole
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (a) electing to
have the Company withhold a portion of the shares of Common Stock otherwise to
be delivered upon receipt or payment of (or the lapse of restrictions relating
to) such Award with a fair market value equal to the amount of such taxes or (b)
delivering to the Company shares of Common Stock other than the shares issuable
upon receipt or payment of (or the lapse of restrictions relating to) such Award
with a fair market value equal to the amount of such taxes.
SECTION IX. AMENDMENT AND TERMINATION
9.1 TERM OF PLAN. Unless the Plan shall have been discontinued or
terminated as provided in Section 9.2 hereof, or unless the Company's
shareholders have failed to approve this Plan and the Stock Incentive Plan, the
Plan shall terminate on December 31, 2000. This Plan shall be of no effect, and
the Board of Directors shall be deemed automatically to have terminated this
Plan, if the Company's shareholders fail to approve the Stock Incentive Plan at
the Company's 1994 Annual Meeting of Shareholders. No Awards may be granted
after such termination, but termination of the Plan shall not alter or impair
any rights or obligations under any Award theretofore granted, without the
consent of the Participant or holder or beneficiary thereof, except as otherwise
provided in the Plan or the Award Agreement.
9.2 AMENDMENTS TO PLAN. Except to the extent prohibited by applicable
law and unless otherwise expressly provided in the Plan or an Award Agreement,
the Board of Directors of the Company may amend, alter, suspend, discontinue or
terminate the Plan; provided, however, that notwithstanding any other provision
of the Plan or any Award Agreement, without the approval of the shareholders of
the Company, no such amendment, alteration, suspension, discontinuation or
termination shall be made that, absent such approval:
(a) would cause Rule 16b-3 to become unavailable with
respect to the Plan; or
6
<PAGE>
(b) would violate the rules or regulations of the New York
Stock Exchange, any other securities exchange or the National Association of
Securities Dealers, Inc. that are applicable to the Company.
9.3 WAIVERS OF AWARD CONDITIONS OR RIGHTS. The Committee may waive
any condition of, or rights of the Company under, any outstanding Award,
prospectively or retroactively.
9.4 LIMITATION ON AMENDMENTS TO AWARDS. Neither the Committee nor the
Company may amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively or retroactively, without the consent of the Participant or
holder or beneficiary thereof, except as otherwise provided in the Plan or the
Award Agreement.
9.5 CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. Except to
the extent prohibited by applicable law and unless otherwise expressly provided
in the Plan or an Award Agreement, the Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan, any Award or any Award
Agreement in the manner and to the extent it shall deem desirable to carry the
Plan into effect.
SECTION X. MISCELLANEOUS
10.1 GOVERNING LAW. The Plan and any Award Agreement shall be governed
by and construed in accordance with the internal laws, and not the laws of
conflicts, of the State of Minnesota.
10.2 SEVERABILITY. If any provision of the Plan, any Award or any
Award Agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan, any Award or any
Award Agreement under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination of the
Committee, materially altering the purpose of intent of the Plan, the Award or
the Award Agreement, such provision shall be stricken as to such jurisdiction,
and the remainder of the Plan, any such Award or any such Award Agreement shall
remain in full force and effect.
10.3 NO TRUST OR FUND CREATED. Neither the Plan nor any Award or Award
Agreement shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any Affiliate and a
Participant or any other person. To the extent that any person acquires a right
to receive payments from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured general creditor of
the Company or of any Affiliate.
10.4 HEADINGS. Headings are given to the sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed
7
<PAGE>
in any way material or relevant to the construction or interpretation of the
Plan or any provision thereof.
10.5 STOCK INCENTIVE PLAN. Except as otherwise specifically stated
herein, all of the terms and conditions of the Stock Incentive Plan shall also
govern Awards under this Plan.
8
<PAGE>
Exhibit 12
DELUXE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six-Months
Ended Years Ended December 31,
------------- ------------------------------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ---- ----
EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
Income from Continuing Operations
before Income Taxes $97,521 $169,319 $246,706 $235,913 $324,783 $295,493 $282,506
Interest expense
(excluding capitalized interest) 5,305 13,099 9,733 10,070 15,371 8,220 1,427
Portion of rent expense under
long-term operating leases
representative of an interest factor 7,085 14,761 13,554 13,259 12,923 11,807 10,849
Amortization of debt expense 61 84 84 84 84 71 0
-- -- -- -- -- -- -
TOTAL EARNINGS $109,972 $197,262 $270,077 $259,326 $353,161 $315,591 $294,782
FIXED CHARGES
Interest Expense
(including capitalized interest) $6,196 $14,714 $10,492 $10,555 $15,824 $8,990 $1,860
Portion of rent expense under
long-term operating leases
representative of an interest factor 7,085 14,761 13,554 13,259 12,923 11,807 10,849
Amortization of debt expense 61 84 84 84 84 71 0
-- -- -- -- -- -- -
TOTAL FIXED CHARGES $13,342 $29,559 $24,130 $23,898 $28,831 $20,868 $12,709
RATIO OF EARNINGS
TO FIXED CHARGES: 8.2 6.7 11.2 10.9 12.2 15.1 23.2
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 21,058
<SECURITIES> 0
<RECEIVABLES> 178,922
<ALLOWANCES> 0
<INVENTORY> 64,148
<CURRENT-ASSETS> 369,674
<PP&E> 941,333
<DEPRECIATION> 473,061
<TOTAL-ASSETS> 1,279,755
<CURRENT-LIABILITIES> 356,867
<BONDS> 111,355
82,359
0
<COMMON> 0
<OTHER-SE> 693,237
<TOTAL-LIABILITY-AND-EQUITY> 1,279,755
<SALES> 954,668
<TOTAL-REVENUES> 954,668
<CGS> 462,206
<TOTAL-COSTS> 854,749
<OTHER-EXPENSES> (2,907)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,305
<INCOME-PRETAX> 97,521
<INCOME-TAX> 40,544
<INCOME-CONTINUING> 56,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,977
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
